Compaq to launch e-commerce line

Compaq will enter the electronic
commerce arena in a big way next week when the company announces a fleet of
hardware and software that range all the way from desktops
optimized for electronic retailing to enterprise payment and security
systems targeted at banks and Internet Service Providers (ISPs).

The effort is, if anything, far ranging. Compaq will be providing products
or services to all parties in the electronic commerce buying chain, said
George Favalaro, director of business strategy in the company's Internet
division.

At one end of the spectrum, Compaq will release a desktop bundled with an
e-commerce suite from Inex. Next up the
ladder, Compaq will be offering specially configured ProLiant servers with
Microsoft's commerce server as well
as firewall software from Raptor.

For institutions, the company will release the "iTP Certificate Solution"--a
collection of enterprise applications designed to handle large volumes of
secure transactions. Built in conjunction with its Tandem division, these
applications, which will sell for several thousand dollars, will be sold
separately or with high-end servers to financial institutions.

Compaq is also lining up resellers, system integrators, and ISPs to sell and
install these products. In addition, Compaq will open the ClubWeb Internet
Community, an online informational site for consumers and business
partners.

"This is a classic Compaq approach. We are leveraging the leaders in the
industry and we are leveraging our channel," Favaloro said. "This is our
first set of solutions for the e-commerce marketplace."

The e-commerce strategy also seemingly provides a way around the price wars
that have ravaged hardware vendors. Compaq, among other computer makers,
has seen margins shrink drastically on desktops and servers in the past
year due to price competition. In turn, these companies have turned to a
volume sales strategy to sustain profitability, which has led to bloated
inventories and further price cuts.

While product bundling cannot insure a company from price competition, it
can provide some insurance because greater differences and capabilities
exist between the product offerings of the various vendors.

While Favaloro stated that these products were not designed to recapture
margins, he acknowledged that they will be more expensive than their
stripped-down counterparts.

The ProLiant e-commerce servers, for instance, come in toward the top of
the line for their product categories. Compaq is offering ProLiant 850R and
6500 servers configured for e-commerce. The 850R server will come with a
200-MHz Pentium Pro processor, 128MB of memory, and a 4.3GB hard drive, as
well as a commerce suite from Microsoft. It will sell for $13,696. A base
level 850R sells for around $3,000 and comes with only 32MB of memory.

The iTP package will provide Compaq with an opportunity to become a back-end provider for large corporations. Compaq acquired Tandem partly
because the Tandem would give them admission to the "glass house" computer
centers in major corporations. These solutions will do exactly that.
Targeted at large financial institutions and telephone carriers, these iTP
systems, which will handle payment, certification, and communication
integration with customer support centers and other e-commerce functions,
will cost several thousand even without the hardware and require
integration and consulting services to install.

Compaq has not released pricing on its desktop e-commerce solution. The
desktop solution, however, will work differently than the server bundles.
With the desktop, merchants will configure a storefront and then hand over
the management of the operation to an ISP, Favaloro said.